Lunchtime Links 9-18

FDIC considers using Treasury line of credit (WSJ) This would be a shame. FDIC should keep charging special assessments on banks before taxpayers are forced to borrow to replenish the fund. CR notes that Senator Carl Levin has asked Bair not to charge another assessment because it would hurt small banks. That’s just misdirection; FDIC charges special assessments as a % of total deposits, which means the biggest banks pay the most. 95% of banks got a free ride for years, not paying ANY premiums for deposit insurance from 1996-2006. Now they have to pay. Special assessments are an good way to shrink the financial system; it reduces the profitability of the business!

Sotomayor issues challenge to century of corporate law (WSJ) “Judges ‘created corporations as persons, gave birth to corporations as persons,’ she said. ‘There could be an argument made that that was the court’s error to start with…[imbuing] a creature of state law with human characteristics.'”

Blackrock’s Fink says Obama rules threaten market (Bloomberg, ht NC) Banks that service mortgages don’t want to modify them because they also hold the home equity loans on their books. If you modify the first mortgage, the home equity loan gets wiped out (right?). And the four largest services — yeah: Citi, BofA, Wells, Chase — have $450 billion worth of home equity loans on their books.

Re FDIC funding: Need to disagree with you at least some. The really big banks (as in TBTF) have a relatively small deposit basis, depending as we’ve seen on securitization and other non-bank activities. If the special assessments were based on total assets, then we’d be cooking–especially if this were a “progressive” assessment rate.

(I also don’t like putting the taxpayer on the hook for bailing out banks.)

Per Sotomayor:
The new Justice may have inadvertently exposed the corporate status of the United States as codified in section 3002 title 28. http://www.law.cornell.edu/uscode/28/usc _sec_28_00003002—-000-.html

(15) “United States” means—
(A) a Federal corporation;
(B) an agency, department, commission, board, or other entity of the United States; or
(C) an instrumentality of the United States.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~
Perhaps this is a rationale to describe the constitution as a “living” document?